Consumers win in Court of Appeal real estate decision


A recent decision by the Court of Appeal highlights the importance of agents acting in a vendor’s best interests when an agent is buying a property that is listed with their agency.

“This is an excellent decision that reinforces how critical it is for an agent to meet their obligations under the Real Estate Agents Act 2008 and protect the vendor’s best interests when there is a conflict of interest” says Kevin Lampen-Smith, the Chief Executive of the Real Estate Agents Authority. 

“The Real Estate Agents Act 2008 is all about consumer protection and there are some protections under the Act, which prevent agents, or people related to them, from buying a vendor’s property unless certain requirements have been met, including obtaining the vendor’s consent and providing an independent valuation of the property to the vendor.” 

“These procedural protections supplement the fundamental fiduciary duty on agents to act in the best interests of their vendor. In the case of a conflict of interest, this means they must ensure the vendor understands the nature of the conflict of interest and its potential impact.  This helps the vendor to make a fully informed decision - it is not enough to simply fill in the form” continues Mr Lampen-Smith.

The Court of Appeal decision found that Barfoot and Thompson failed to act in the best interests of the vendor when one of its agents wanted to buy the vendor’s property.  Barfoot and Thompson’s internal policy stated that if one of their agents, or a related person, wanted to buy a property listed for sale with the agency then the agent could deal directly with the seller.  As the agency’s policy on commission was linked to involvement in sale negotiations, this meant the purchasing agent was getting an unearned discount on the price.  The Court concluded that this policy amounts to unsatisfactory conduct as “... the policy leaves the client in the hands of a licensee whose objective as would-be purchaser necessarily conflicts with the best interest of the client as vendor.

“The original decision of unsatisfactory conduct made by the Complaints Assessment Committee has endured rigorous scrutiny through the appeal process and we are very pleased that protecting consumer interests has remained paramount throughout” says Mr Lampen-Smith.

More Information

About the Real Estate Agents Authority

The Real Estate Agents Authority (REAA) is the independent government regulatory body for the real estate industry in New Zealand. Our job is to promote a high standard of service and professionalism in the real estate industry and help protect buyers and sellers. We provide information for buyers and sellers, provide advice and guidance for agents and deal with complaints about agents' behaviour. The REAA is a Crown entity, established under the Real Estate Agents Act 2008.

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Ngaire Vanderhoof
(04) 815 8466